Price comparison services, such as websites or apps, are used as catalogues where consumers can search for different goods, find information about them and, in particular, identify the cheapest online store. However, price comparison services are not only beneficial to consumers. Retailers can also use them to increase their visibility and boost sales.
Price comparison services (unlike online marketplaces) usually do not offer sales and purchase functionality. Their role is to direct customers to the online stores of specific retailers, where consumers can then place their orders. They are therefore more of an advertising tool than an online sales channel.
Since price comparison services include publicly available offers from many online retailers, their existence increases market transparency and has the potential to intensify both intrabrand and interbrand price competition.
However, suppliers may wish to limit or prohibit distributors’ use of price comparison services in distribution agreements. One reason may be to protect brand image, since price comparison services focus primarily on the lowest price rather than on quality. Another reason may be that suppliers wish to protect specific business models based on specialisation or high quality of goods or services offered rather than price. Restricting or banning the use of price comparison services may also make it more difficult to sell counterfeit goods, since these services can facilitate the marketing of such products.
Neither the Vertical Agreements Block Exemption Regulation (the "VBER") nor the Guidelines on Vertical Restraints (the "Vertical Guidelines") specifically address the issue of restrictions on price comparison services.
It has therefore been left to competition authorities and courts to rule on the matter.
The German ASICS case on branded sports shoes is crucial in this regard. In its judgment, which upheld the fine imposed by the competition authority, the Federal High Court stated that price comparison tools were an important means for consumers to make their online shopping easier. They enabled consumers to choose the cheapest retailer offering the goods – often a small independent online store that would not otherwise be visible to consumers without the existence of price comparison services. The Court therefore concluded that a ban on the use of price comparison services excluded certain retailers from competition and thereby restricted passive sales. It was thus considered a hardcore restriction, prohibited irrespective of the parties’ market shares.
The European Commission addresses price comparison services extensively in the new Vertical Guidelines. It considers three basic situations: a restriction on the use of price comparison services, a complete ban on their use as a full online advertising channel, and a ban on the use of certain price comparison services.
First, restrictions on the use of price comparison services based on the quality requirements of the advertising placed there do not in themselves prohibit the use of such services. The purpose of imposing such conditions is not to impede the distributor’s or its customers’ effective use of the Internet to sell the contract goods or services to certain territories or customers. They may therefore benefit from the new VBER.
Second, a ban on the use of price comparison services as a full online advertising channel hinders the distributor from selling to customers outside its area of activity who wish to purchase online. It can be imposed either directly or indirectly (e.g. by limiting the ability to provide price information to price comparison services, requiring the supplier’s prior approval for their use, or prohibiting the use of the supplier’s brand on such services). Such a prohibition is aimed at hindering the distributor’s effective use of the Internet to sell the contract goods or services. This now constitutes a hardcore restriction under Article 4(e) of the VBER and therefore falls outside the safe harbour of the new regime.
Third, the European Commission considers that a ban on the use of certain price comparison services is generally not intended to prevent retailers from effectively using the Internet to sell contract goods or services to certain territories or customers. Retailers may still use other price comparison services to promote their online sales. If that is the case, the new VBER will apply. However, if the ban targeted the most commonly used services and the remaining ones were de facto ineffective in attracting customers, such a restriction could amount to an anti-competitive agreement. It will therefore always be necessary to assess whether a ban on selected services is designed to hinder the effective use of the Internet by the distributor or its customers.
According to the VBER, targeting customers through price comparison services – under certain conditions – is considered a form of active selling (see DLC Countdown No. 21). It is therefore permissible, and indeed necessary, to restrict the use of price comparison services targeting customers in an exclusive territory within an exclusive distribution system in order to meet the requirement of parallel imposition (see DLC Countdown No. 13).
In the new Vertical Guidelines, the European Commission also addresses price comparison services in the context of a purely qualitative selective distribution system, to which the prohibition on anti-competitive agreements does not apply (see DLC Countdown No. 19). The Commission notes that where restrictions on the use of price comparison services are included in a selective distribution agreement, it is first necessary to assess whether they are an appropriate and proportionate means of maintaining quality or ensuring the proper use of the goods or services. In this context, the Commission observes that price comparison services merely enable customers to access the distributor’s online store, for which the supplier can already impose quality requirements. A ban on their use is therefore unlikely to qualify as a purely qualitative selection criterion.
From 1 June 2022, there will be greater legal certainty regarding the European Commission’s approach to restrictions on price comparison services. Suppliers will be entitled to set quality standards for such services. On the other hand, they will not be able to impose a total ban on their use as a full online advertising channel. Under certain conditions, they may impose a ban on specific price comparison services, provided this does not prevent the distributor or its customers from effectively using the Internet to sell the contract goods or services to particular territories or customers.
Given the growing importance of online sales, the European Commission’s detailed treatment of price comparison services in the Vertical Guidelines is to be welcomed. It will bring greater legal certainty for suppliers, who until now could only assume what was permissible.
The classification of an outright ban on price comparison services as a hardcore restriction is not surprising in light of the Federal High Court’s ruling in ASICS. Nevertheless, the Commission’s explicit recognition of the possibility of restricting their use in certain circumstances is appreciated. This is a welcome element of flexibility, as many suppliers have so far adopted a more cautious approach and opted to avoid using such services altogether.
As we count down to 1 June 2022, we aim to provide you with regular updates and the legal know-how you need to fully prepare your business for the future. Be sure to check out the Distribution Law Center platform and our LinkedIn page for further information on the laws governing vertical agreements, both competition and commercial law. Twenty-seven specialised teams from across the EEA are working hard to make the platform your preferred source of information and guidance.
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